The National Collegiate Athletic Association's March Madness basketball tournaments didn't come close to generating $1 billion in sports betting wagers for New Jersey last month, though they still did help the state set records.

Yet if in-game "micro-betting" were to take hold, it could propel the sports betting revenues in a number of states upward by leaps and bounds. It could also be a huge revenue generator for Flutter Entertainment's (OTC:PDYPF) FanDuel and DraftKings (NASDAQ:DKNG), the two largest sportsbooks in the country.

Soccer fans cheering while watching TV

Image source: Getty Images.

Frenetic levels of sports betting 

Since sports betting was legalized federally in the U.S. in 2018, the market has been growing fast. Almost two dozen states allow sports betting today, and another dozen are expected to legalize it this year. DraftKings believes online betting on sporting events could be a $22 billion opportunity.

Micro-betting is a subset of sports wagering, allowing gamblers to place bets on a game's outcome while it's already underway (in-game betting) or on specific events that may happen in the game, such as will a team score on their next drive (live betting).

JPMorgan analysts recently stated their belief that "in-game betting, and micro-betting in particular, are viewed as products that can help turn live sports into a more immersive gaming experience."

It's the nature of U.S. sports in particular, with their numerous instances of stopping the clock, that could allow oddsmakers to update the potential outcomes that really drive this niche betting opportunity. Unlike soccer, where continuous gameplay is the norm, football, basketball, and baseball -- the reigning triumvirate of U.S. sports -- all have significant downtime in between plays.

Setting up the play

More betting generates more revenue for operators, and increases the likelihood of greater user engagement. A viewer who has skin in the game has increased incentive to remain engaged longer, which leads to opportunities for greater advertising revenue, benefiting operators and broadcasters.

We're seeing the industry lay the groundwork for this: 

JPMorgan estimates 75% of all sports bets in the U.K. are micro-bets. If that model were applied to U.S. sports, with the built-in advantages they have when it comes to this type of gambling, it would seem that it could be a tremendous boon to the industry.

Big opportunities in micro-betting

So a number of players are angling to position themselves to capitalize on this rich market. But which is most likely to come out on top?

It seems intuitive that the biggest sportsbooks, FanDuel and DraftKings, which own about 80% of the market, would be early leaders, but Penn National's Barstool Sports and MGM Resorts (NYSE:MGM) should also grab a big stake in the market.

MGM has turned into the fastest-growing sportsbook, with 12 consecutive months of market share gains and growth accelerating over the past two months.

While there's always the possibility that a dark horse could come out of nowhere to take the lead in this new area of entertainment, the sites with the biggest stakes and the greatest financial wherewithal to make deals are a good bet to end up on top. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.